Global retailers to build on mainland ambitions

PUBLISHED : Wednesday, 19 March, 2008, 12:00am
UPDATED : Wednesday, 19 March, 2008, 12:00am

Globalisation is affecting all social and economic activity and retailing is no exception. Under the weight of the globalising trend, emerging markets are becoming more important as many retailers venture beyond their traditional territories. The process has seen China become the world's ninth most-international retail market - the only non-European country on the top 10 list, according to a survey conducted by CB Richard Ellis. The fact that China is so popular with global retailers is no surprise to those working within the region. Chinese consumer spending per capita remains low compared with more established countries. But the sheer size of the market, coupled with the growth of wealth and the relaxation of traditional barriers to entry such as the need for a domestic partner, has resulted in the mainland arguably becoming the hottest retail market in the world in terms of interest in the past two to three years. Long gone are the days when foreign retailers trading on the mainland were restricted to those operating in the traditional value-oriented categories of hypermarket and fast food. Trendy mid-market fashion brands such as Hennes & Mauritz, Zara, Mango and Promod now occupy prime high street locations in China as they would do in Europe or the United States, and the presence of lifestyle related retailers such as Toys 'R' Us, Home Centre, California Fitness, Adidas and Apple allow developers to plan large and varied shopping centres that are viable. Yet despite China's ranking as ninth on the list of markets most penetrated by international brands, there is room for this to improve considerably due to the number of retailers that do not yet have a trading presence on the mainland but are in various stages of research and business planning. For example, Marks & Spencer recently announced it would develop 50 stores in China, starting in Shanghai where it recently bought a property on Nanjing Road. Similarly, Galeries Lafayette, the French department store, through its joint-venture agreement with I.T, is actively looking for sites. Central of Thailand is understood to have committed to China Resources and Sun Hung Kai's MixC project in Hangzhou for their first store outside Thailand, and Mattel will open the world's first House of Barbie store in Shanghai later this year. The significance of this trend is not just that more and more retailers from around the world believe that China has a part to play in their international network, but that some are selecting China as the location from which to launch their international ambitions. Demand for new store premises from retailers already in the China market and those who have not yet entered, is focused on the tier one cities of Beijing, Shanghai and Guangzhou. Of the top 250 global retailers in terms of retail sales that have representation in China, more than half of all stores are in Shanghai, with Beijing and Guangzhou accounting for 18 per cent and 15 per cent respectively. Representation in secondary cities such as Tianjin, Hangzhou and Qingdao is still relatively limited, although this is growing quickly as retailers once established in the market aggressively expand their property portfolios. As more and more global retailers enter the China market, buoyed by the growing sophistication of the Chinese shopper, the rising sales performance of their retailing peers and an increase in the quality of accommodation on offer, it will not be long before the mainland can be classified as an established rather than emerging retail market, if we have not reached that point already. Bryn Davies is an executive director of retail services of CB Richard Ellis in Greater China